What is Revenue Deficit?

Transcript

Second Method to Reduce Revenue DeficitWe can increase Revenue Expenditure (like by Decrease Govt Expenditure on Welfare Projects) Example Suppose my Revenue Deficit is 100 as shown below Revenue Receipts Revenue Expenditure Revenue Surplus Revenue Déficit 1000 1100 0 100 Answer Increase Receipts Expenditure by 100 Revenue Receipts Revenue Expenditure Revenue Déficit How To Reduce Revenue Deficit? We can Increase Revenue Receipts (like by -Increasing Taxation) Example Suppose my Revenue Deficit is 100 as shown below Revenue Receipts Revenue Expenditure Revenue Surplus Revenue Déficit Answer Increase Revenue Receipts by 100 Revenue Receipts Revenue Expenditure Revenue Surplus Revenue Déficit Option 3- What happens If Govt cuts Expenditure in case of Revenue Deficit Revenue Deficit Committed Exp Welfare Exp Can't be reduced Causes Adverse effect in long run on welfare Capital Exp Affects growth Option 2- What happens If Govt Borrows in case of Revenue Deficity Revenue Deficit Govt Borrows (Take loans or issue bonds) Govt has to pay Interest Increase in Debt Increase in Interest Liability Option 1- What happens If Govt Dissaves in case of Revenue Deficit Revenue Deficit Govt Dissaves (Use savings of Other sectors) Capital Receipt use to Pay Revenue Exp Example Funds received from Sale of PSU Used to pay Salaries To Govt Employees EFFECT OF REVENUE DEFICIT Revenue Expenditure 3200 Less Revenue Receipts 2000 Revenue Deficit 1200 Option 1 Govt Dissaves Option 2 Govt Borrows Option 3 Govt cuts Expenditure Example 2 How to Calculate Revenue Deficit? Revenue Receipts Capital Receipts Total Receipts Revenue Expenditure Capital Expenditure Total Expenditure Answer Revenue Expenditure 3200 Less Revenue Receipts 2000 Revenue Deficit 1200 Note- To Calculate Revenue Deficit, we take only Revenue items and not Capital Receipts and Exp. Example 1 How to Calculate Revenue Deficit? Example Revenue Receipts Revenue Expenditure Revenue Surplus Revenue Déficit Revenue Deficit= Revenue Expenditure Less Revenue Deficit (We show it in positive by doing Expenditure-Receipts (1100-1000) =100 and not Receipts-Expenditutre 1000-1100=-100 Revenue Deficit Only Revenue (Not Capital) Excess Of Expenditure Over Income It is excess of Revenue expenditure over Revenue Receipts Revenue Deficit= Revenue Expenditure Less Revenue Deficit